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RNS Number : 5886E
Petards Group PLC
01 June 2012
1 June 2012
PETARDS GROUP PLC
PRELIMINARY RESULTS ANNOUNCEMENT
Petards Group plc ('Petards'), the AIM quoted developer of
advanced security and surveillance systems, reports its audited
result for the year ended 31 December 2011.
Financial results
-- Revenues up 6.5% to GBP12.1m (2010: GBP11.4m)
-- Operating profits increased to GBP335,000 (2010: GBP85,000)
-- Profit before tax GBP215,000 (2010: GBP53,000)
-- Profit after tax GBP312,000 (2010: GBP364,000)
-- Gross margin 37% (2010: 38%)
-- Net debt at 31 December 2011 reduced to GBP1.5m (Dec 2010: GBP2.0m)
-- Basic and diluted EPS of 4.9p (2010 as restated: 5.7p)
Other highlights
-- GBP3m orders for electronic countermeasures systems from MOD
for Puma and Chinook Mk6 aircraft
-- Completion of deliveries of eyeTrain CCTV systems to
Bombardier Transportation for Stansted Express trains
-- Successfully managed the consequences of a major fire at key supplier during 2011
Tim Wightman, Chairman of Petards, commented:
"For the past two years the poor state of government finances,
particularly those in the UK and the Eurozone, has significantly
reduced the spending levels within a significant proportion of our
customer base. As we are all aware the economic uncertainties have
increased again recently and the strengthening of sterling against
the Euro will not be helpful if it proves to be a continuing trend.
While the Group has remained profitable, the rate at which we have
been able to strengthen our balance sheet over the past two years
has slowed reducing the level of investment capital available to
grow the business as quickly as we would like.
However, because of worldwide commitment to the modernisation
and development of rail travel we continue to be confident that we
are operating in markets which have the potential for good returns.
The opportunities in our home markets in the medium term should
give a good base from which to deliver growth from the penetration
of export markets.
The Board expects 2012 revenues to include the benefit of
several orders anticipated to be received in the third quarter. As
in previous years, revenues for 2012 are expected to be weighted
towards the second half of the year."
Contacts
Petards Group plc www.petards.com
Andy Wonnacott, Group Finance Tel: 0191 420 3000
Director
WH Ireland Limited www.wh-ireland.co.uk
Mike Coe, Marc Davies Tel: 0117 945 3470
Chairman's statement
Introduction
Despite the fact that the economic environment in which we are
operating remained challenging and we had to overcome disruption in
our supply chain due to a major fire at a key supplier, I am
pleased to report that the Group recorded both revenue and profits
growth during the year ended 31 December 2011. This reflected the
benefit of some notable orders for our defence products and also
deliveries of our eyeTrain systems for two large UK rail
projects.
Results
Revenues for the year grew by over 6% to GBP12.1m (2010:
GBP11.4m) which gave rise to an operating profit of GBP335,000, up
from GBP85,000 in 2010. We achieved a gross margin of 36.5% which
while down slightly on 2010 (37.9%), was in line with our
expectations.
Administrative expenses for the year amounted to GBP4.1m, a
reduction of just over 3% on 2010 (GBP4.2m).
Net financial expenses were higher than the prior year at
GBP120,000 (2010: GBP32,000). 2010 included a GBP53,000 foreign
exchange gain compared with the GBP9,000 loss incurred in 2011 and
borrowing levels were higher during much of the second half of
2011. These borrowings were a consequence of the higher working
capital caused by the re-scheduling of eyeTrain system shipments
resulting from a fire at one of our key suppliers in May 2011.
Profits after tax were GBP312,000 (2010: GBP364,000) and
included a net tax credit of GBP97,000. The prior year's tax credit
of GBP311,000 included GBP222,000 from the recognition of a
deferred tax asset in respect of additional tax losses whereas in
2011 the Group did not recognise any such additional deferred tax
assets. At 31 December 2011 80% of the Group's total deferred tax
assets of GBP3.5m remain unrecognised in the balance sheet. The
reduction in earnings per share to 4.90p (2010: 5.72p) was also due
to the lower deferred tax credit.
Cash and Balance Sheet
By 31 December 2011 the impact of the fire referred to above had
diminished significantly and the Group generated an operating cash
inflow for the year overall of GBP0.9m which compared favourably
with the GBP0.9m operating cash outflow experienced in 2010.
Net debt at 31 December 2011 was GBP1.5m (2010: GBP2.0m). During
the year we repaid a further GBP0.5m of our term loan reducing the
amount outstanding to GBP0.55m. That loan is scheduled to be fully
repaid by the end of January 2013 and once repaid the Group will
have the annual cash benefit of over GBP0.5m, presently required to
service the loan, to invest in its business.
The retention of the profit after tax resulted in total equity
at 31 December 2011 increasing to GBP0.4m (2010: GBP0.1m).
As I reported in September 2011, at the General Meeting held on
30 June 2011 shareholders passed a special resolution to undertake
a capital reorganisation. The sale proceeds from the fractional
shares arising were distributed to the eligible shareholders during
October 2011.
Business review
The Group remains focussed on the design, development and supply
of ruggedised electronic systems predominantly for fitment onto a
variety of new build and existing vehicles used by customers in the
rail transport, defence and emergency services industries as well
as the provision of value added design and support services for the
supply, commissioning, maintenance and obsolescence management of
legacy systems.
The increase in revenues in 2011 was partly driven by the
receipt of the first electronic countermeasures systems orders from
the MOD since the Strategic Defence and Security Review was
undertaken in 2010. An upgrade order for the Puma helicopter life
extension programme in June was followed by a much larger order in
October 2011 for the provision of defensive aids equipment for the
MOD's new Chinook Mk6 helicopters some of which was delivered by
year end. Amongst other projects that were major contributors to
revenues in 2011 were shipments of our eyeTrain on-board digital
CCTV systems to both Transys Projects and Bombardier
Transportation. These were for fitment onto over 200 vehicles as
part of a fleet upgrade programme being undertaken for trains
operated by Southeastern Trains. Budgetary pressures faced by
police forces within the UK and Europe continued to affect our
sales of Provida products which remained at similar levels to the
previous year. Those pressures remain and our expectation is that
any revenue growth in the near term is most likely to come from
markets outside of those territories.
The fleet of Electrostar EMU trains Bombardier Transportation
supplied for operation on the Stansted Express service have now all
entered service following the completion of our contract during
2011. In addition to eyeTrain onboard CCTV, that fleet incorporates
a number of other new Petards systems including Driver Only
Operation (DOO), track debris cameras and video surveillance of the
pantograph. All of these systems provide significant cost reduction
and safety improvement benefits to both the train operator and
Network Rail.
The opportunities for sales of our eyeTrain products in the UK
over the next five years look encouraging for supplies onto both
new and refurbished trains. The approvals announced during 2011 by
the Department for Transport (DfT) for new rolling stock for the
Intercity Express and Thameslink programmes have been followed in
February 2012 by the issue of an invitation to negotiate to train
builders for the procurement of around 60 new trains for the
Crossrail project. The total number of new vehicles for these three
projects is over 2,000 which are to be delivered over the period
2013 to 2018. In addition to these new trains, a higher level of
activity is expected in the refurbishment of existing rolling stock
arising from the letting of new franchises. Approximately half of
the existing DfT franchises are due for renewal over the next two
years.
Our objective to expand sales globally remains. However, while
in 2011 we grew revenues from overseas customers by over 65% year
on year, we still have much work to do in this area and that
increase cannot yet be seen as part of a trend as the growth arose
from a relatively small number of project based sales. Our strategy
is to achieve sustainable growth by working with partners who have
a presence in our target geographic markets and with OEMs who can
provide "pull through" for our products into the markets in which
they operate. Our opportunities for growth in export markets remain
strong and the extent of the Group's ability to capitalise upon
this potential will remain for the time being a function of the
available capital resources as well as its ability to continue to
develop market leading products.
While our US operation continued to support existing UVMS
network video software customers, it is no longer a significant
area of our business and therefore in future we will not report
this separately from our UK business.
Research and development
During the year the Group continued to invest in its products,
in particular enhancements to its cameras and camera technologies.
Expenditure of GBP0.2m was capitalised (2010: GBP0.3m) and net of
amortisation, capitalised development expenditure decreased by
GBP0.1m to GBP0.6m (2010: GBP0.1m increase).
The pace at which our development programme can be progressed is
limited by the resources available to the Group. Accordingly the
Board is considering how additional resources might be made
available to advance the programme for the benefit of customers and
shareholders alike.
Employees
Petards is fortunate to have a committed workforce with a depth
of knowledge and expertise that is valued by both the Company and
its customers and I would like to thank our employees for their
continuing efforts and support.
The Board and Senior Management
On 31 December 2011 Bill Conn relinquished his duties as the
Group's Chief Executive and Managing Director of Petards
Joyce-Loebl and we thank him for his dedication and contribution in
reducing the cost base and successfully focusing the Group on its
security products within the rail transport, defence and security
markets. We are pleased that he continues to contribute to the
Company by remaining on the Board as a non executive director.
The Board considered that at this stage of the Group's
development it was appropriate to appoint a replacement for the
role of Managing Director of Petards Joyce-Loebl in order to focus
on the future development of that company and we were pleased that
Tom Burwood joined us in that capacity on 1 January 2012. Tom was
previously at Cobham plc, where latterly he was the Business
Development Director of Cobham Antenna Systems. With a strong
background in Electrical and Electronic Engineering, he has many
years' of business management and international business
development experience having successfully grown companies in a
variety of high technology market sectors. He joined Cobham in 2003
when it acquired Precision Antennas Limited of which he was
Managing Director and whose revenues grew from GBP5m to GBP27m
under his stewardship.
Outlook
For the past two years the poor state of government finances,
particularly those in the UK and the Eurozone, has significantly
reduced the spending levels within a significant proportion of our
customer base. As we are all aware the economic uncertainties have
increased again recently and the strengthening of sterling against
the Euro will not be helpful if it proves to be a continuing trend.
While the Group has remained profitable, the rate at which we have
been able to strengthen our balance sheet over the past two years
has slowed reducing the level of investment capital available to
grow the business as quickly as we would like.
However, because of worldwide commitment to the modernisation
and development of rail travel we continue to be confident that we
are operating in markets which have the potential for good returns.
The opportunities in our home markets in the medium term should
give a good base from which to deliver growth from the penetration
of export markets.
The Board expects 2012 revenues to include the benefit of
several orders anticipated to be received in the third quarter. As
in previous years, revenues for 2012 are expected to be weighted
towards the second half of the year.
Tim Wightman Chairman
Consolidated Income Statement
for year ended 31 December 2011
Note 2011 2010
GBP000 GBP000
Revenue 2 12,127 11,392
Cost of sales (7,706) (7,069)
Gross profit 4,421 4,323
Administrative expenses (4,086) (4,238)
Operating profit 335 85
Financial income - 53
Financial expenses (120) (85)
Profit before tax 215 53
Income tax 3 97 311
Profit for the year attributable to
equity shareholders of the parent 312 364
Basic and diluted earnings per share
(pence) - 2010 as restated 5 4.90 5.72
Consolidated Statement of Comprehensive Income
for year ended 31 December 2011
2011 2010
GBP000 GBP000
Profit for the year 312 364
Other comprehensive income
Currency translation on foreign currency
net investments 10 (34)
Total comprehensive income
for the year 322 330
Statements of Changes in Equity
for year ended 31 December 2011
Currency
Share Share Retained translation Total
capital premium earnings differences equity
Group GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2010 6,367 23,255 (29,724) (190) (292)
Profit for the year - - 364 - 364
Other comprehensive income - - - (34) (34)
Total comprehensive income
for the year - - 364 (34) 330
Equity-settled share based
payments - - 18 - 18
Balance at 31 December
2010 6,367 23,255 (29,342) (224) 56
Balance at 1 January 2011 6,367 23,255 (29,342) (224) 56
Profit for the year - - 312 - 312
Other comprehensive income - - - 10 10
Total comprehensive income
for the year - - 312 10 322
Equity-settled share based
payments - - 14` - 14
Capital reorganisation
costs - (32) - - (32)
Balance at 31 December
2011 6,367 23,223 (29,016) (214) 360
Consolidated Balance Sheet
at 31 December 2011
Note 2011 2010
GBP000 GBP000
ASSETS
Non-current assets
Property, plant and equipment 155 182
Goodwill 401 401
Development costs 577 701
Deferred tax assets 842 790
1,975 2,074
Current assets
Inventories 1,237 911
Trade and other receivables 3,087 2,408
Cash and cash equivalents - escrow
deposits 77 -
Cash and cash equivalents 21 -
4,422 3,319
Total assets 6,397 5,393
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent
Share capital 4 6,367 6,367
Share premium 23,223 23,255
Currency translation reserve (214) (224)
Retained earnings deficit (29,016) (29,342)
Total equity 360 56
Non-current liabilities
Interest-bearing loans and borrowings 42 550
Deferred tax liabilities 144 189
186 739
Current liabilities
Interest-bearing loans and borrowings 1,459 1,453
Other trade and other payables 4,392 3,145
5,851 4,598
Total liabilities 6,037 5,337
Total equity and liabilities 6,397 5,393
Consolidated Statement of Cash Flows
for year ended 31 December 2011
2011 2010
GBP000 GBP000
Cash flows from operating activities
Profit for the year 312 364
Adjustments for:
Depreciation 73 138
Amortisation of intangible assets 325 250
Financial income - (53)
Financial expense 120 85
Profit on sale of property, plant
and equipment - (4)
Equity settled share-based payment
expenses 14 18
Income tax credit (97) (311)
Operating cash flows before movement
in working capital 747 487
Change in trade and other receivables (679) 1,042
Change in inventories (326) 30
Change in trade and other payables 1,259 (2,408)
Cash generated from operations 1,001 (849)
Interest received - 53
Interest paid (125) (83)
Net cash from operating activities 876 (879)
Cash flows from investing activities
Sale of property, plant and equipment - 4
Acquisition of property, plant and
equipment (46) (53)
Capitalised development expenditure (201) (330)
Cash deposits held in escrow (77) -
Net cash outflow from investing activities (324) (379)
Cash flows from financing activities
Capital reorganisation costs (32) -
Repayment of bank borrowings (503) (400)
Net cash outflow from financing activities (535) (400)
Net increase/(decrease) in cash and
cash equivalents 17 (1,658)
Cash and cash equivalents at 1 January (953) 701
Effect of exchange rate fluctuations
on cash held 3 4
Cash and cash equivalents at 31 December (933) (953)
1 Basis of preparation and status of financial information
The preliminary announcement has been prepared in accordance
with the recognition and measurement principles of International
Financial Reporting Standards as adopted by the EU ("adopted
IFRSs"), IFRIC interpretations and the Companies Act 2006
applicable to companies reporting under IFRS. It does not include
all the information required for full annual accounts.
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 December 2011
or 31 December 2010 but is derived from those accounts. Statutory
accounts for 2010 have been delivered to the registrar of
companies, and those for 2011 will be delivered in due course. The
auditor has reported on those accounts; his reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying his report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
2 Segmental information
The analysis by geographic segment below is presented in
accordance with IFRS 8 on the basis of those segments whose
operating results are regularly reviewed by the Board of Directors
(the Chief Operating Decision Maker as defined by IFRS 8) to make
strategic decisions.
The Board of Directors consider the business from a geographic
perspective, with consideration of the performance of its UK and US
operations. An analysis of segmental information by geographical
component is set out below. This information is presented by
geography of revenue by source. There are no inter segment
transactions.
As the Board of Directors receives segment revenue and operating
profit/(loss) on the same basis as for the statutory financial
statements no further reconciliation is considered to be
necessary.
UK USA Total
2011 2010 2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Segment revenue 12,083 11,315 44 77 12,127 11,392
Segment operating profit/(loss)
before depreciation
and amortisation 824 464 (91) (8) 733 456
Depreciation of tangible
fixed assets (73) (118) - (3) (73) (121)
Amortisation of intangible
fixed assets (325) (250) - - (325) (250)
Segment operating profit/(loss) 426 96 (91) (11) 335 85
Financial income - 53
Financial expenses (120) (85)
Statutory profit before
tax 215 53
Segment assets 6,294 5,293 103 100 6,397 5,393
Segment liabilities (4,832) (4,218) (1,205) (1,119) (6,037) (5,337)
Segment net assets/(liabilities) 1,462 1,075 (1,102) (1,019) 360 56
Revenue by geographical destination can be analysed as
follows:
2011 2010
GBP000 GBP000
United Kingdom 9,498 9,822
Continental Europe 1,624 1,037
Rest of World 1,005 533
12,127 11,392
Included in the above amounts are revenues of GBP9,704,000
(2010: GBP6,139,000)) in respect of construction contracts. The
balance comprises revenue from sales of goods and services.
3 Taxation
Recognised in the income statement
2011 2010
GBP000 GBP000 GBP000 GBP000
Total current tax - -
Deferred tax credit
Origination and reversal
of temporary differences (37) 10
Recognition of previously
unrecognised tax losses - (222)
Utilisation of recognised
tax losses 103 -
Adjustment in respect of
prior years (163) (99)
Total deferred tax (97) (311)
Total tax credit in income
statement (97) (311)
The deferred tax credit of GBP163,000 in respect of prior years
arose from increased tax losses relating to R&D credits on
expenditure incurred in 2010 not recognised in the accounts until
2011.
Reconciliation of effective tax rate
2011 2010
GBP000 GBP000
Profit before tax 215 53
Tax using the UK corporation tax rate of 26.5%
(2010: 28%) 57 15
Non-deductible expenses 6 67
Non-taxable income - (46)
Recognition of previously unrecognised tax
losses - (122)
Utilisation of tax losses (50) (115)
Effect of tax losses generated in year not
provided for in deferred tax 24 -
Change in unrecognised temporary differences (14) (26)
Adjustments in respect of prior years (163) (99)
Effect of rate change 43 15
Total tax credit (97) (311)
4 Share capital
At 31 December At 31 December
2011 2010
No No
Number of shares in issue - allotted,
called up and fully paid
New ordinary shares of 1p each 6,367,100 -
Deferred shares of 1p each 630,342,900 -
Ordinary shares of 1p each - 636,710,000
636,710,000 636,710,000
GBP000 GBP000
Value of shares in issue - allotted, called
up and fully paid
New ordinary shares of 1p each 64 -
Deferred shares of 1p each 6,303 -
Ordinary shares of 1p each - 6,367
6,367 6,367
On 30 June 2011 shareholders passed a resolution to reorganise
the Company's share capital. Under this reorganisation, the existing
ordinary shares of 1p each were consolidated into new consolidated
ordinary shares of GBP100 each on the basis of one new consolidated
ordinary share for each 10,000 existing ordinary shares. Each new
consolidated ordinary share was then sub-divided into 100 new ordinary
shares of 1p each and 9,900 deferred shares of 1p each.
Following the reorganisation, the Company's issued share capital
comprises 6,367,100 ordinary shares of 1p each and 630,342,900
deferred shares of 1p each. The ordinary shares have equal voting
rights. The deferred shares have no voting rights and are not entitled
to any dividends and have no other right or participation in the
profits of the Company.
5 Earnings per share
The calculation of basic earnings per share for 2010 was based
on the profit attributable to ordinary shareholders of GBP364,000
(2009: GBP1,108,000) divided by the weighted average number of
ordinary shares outstanding during the year ended 31 December 2010
of 636,708,314 (2009: 636,706,423).
Diluted earnings per share is identical to the basic earnings
per share. None of the share options are dilutive as the exercise
prices are higher than the average market price of the shares.
The calculation of basic earnings per share for 2011 was based
on the profit attributable to ordinary shareholders of GBP312,000
(2010: GBP364,000) divided by the weighted average number of
ordinary shares outstanding during the year ended 31 December 2011
of 6,367,100 (2010: 6,367,100 restated). The weighted average
number of ordinary shares for the year ended 31 December 2010 have
been restated from 636,708,314 to 6,367,083 to reflect the
reorganisation of the company's share capital on 30 June 2011 as
described in note 4.
Year ended
31 December
2010
Earnings
Profit for the period (GBP000) 364
Number of shares
Weighted average number of ordinary
shares as restated 6,367,083
Weighted average number of ordinary
shares as originally stated 636,708,314
Earnings per share
Basic and diluted as originally stated
(pence) 0.06
This information is provided by RNS
The company news service from the London Stock Exchange
END
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